Exclusive: Carol Bartz Out at Yahoo; CFO Tim Morse Named Interim CEO

According to sources at the company, Yahoo’s Carol Bartz is no longer CEO of Yahoo. CFO Tim Morse has been named interim CEO.

The situation around what is clearly an ouster is uncertain, but Bartz has had a very rocky tenure in her 32 months at the company.

[UPDATE: Yahoo confirmed the departure of Bartz in a press release outlining a reorganization.]

Bartz also sent a stunning email to staff, saying she had been ousted:

To all,

I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward.

Carol

Several sources said the board, specifically Chairman Roy Bostock and Co-founder, as well as director Jerry Yang, acted today, informing Bartz by phone of the need to make a change.

What the next steps will be are unclear, but Yahoo needs desperately to explore a range of strategic changes to bring it back to its former glory.

But Wall Street liked the move, with Yahoo stock up more than six percent already in after-hours trading.

Sources said Morse held a call with Yahoo’s senior staff this afternoon, telling them Bartz was out and that a search for a permanent CEO will be commencing.

Why Yahoo’s board did not name a new leader immediately is curious and might indicate a larger deal around Yahoo is in the offing.

As I wrote earlier today, when the Internet giant announced on January 13, 2009, that it had hired longtime Silicon Valley tech veteran — who was well-regarded for her tenure at running Autodesk — to replace outgoing CEO and co-founder Yang and turn around the company, there was much hope.

At the time, she presented a take-no-prisoners image and was touted as someone with a reputation as a professional manager who could clean up the place.

Not so, as it has turned out.

While Bartz has streamlined certain areas and made some strong management hires, her performance has been decidedly bumpy and mostly downhill.

The share price has settled in at about $12.50 (just about where it was when Bartz took over), Yahoo’s recent financial results have been weak, its key advertising business is struggling, its attrition rate among engineers and others is startlingly high and its product innovation cycle seems stopped up.

Add to that: Weak relationships with key Asian partners, a pricey but failed marketing effort and a proclivity for embarrassing verbal gaffes by Bartz.

Still, given that Yahoo’s Internet traffic, top media sites and brand remain huge, the going-sideways situation has again caused some investors — including powerful private equity firms and other monied investors — to pull out their spreadsheets about a variety of scenarios related to Yahoo.

The players who have sniffed around of late are powerful, sources said, including Silver Lake Partners, Andreessen Horowitz, former News Corp. exec Peter Chernin and Providence Equity Partners, among others. Also in the Wall Street rumor mill recently are large companies: AT&T, News Corp. and Verizon.

All the schemes are different — ranging from taking it private to making a large investment to splitting it into parts — although they all seem to require cooperation with Yahoo to get done.

And while there is no serious effort afoot as yet, there have been increasing signs of late that Yahoo’s board is ready to listen to any serious offers, said multiple sources, especially as the company has continued to drift under the leadership of Bartz.

While board chairman Bostock has publicly backed Bartz — after all, he was her biggest champion at the time of her hiring — multiple sources said he had started to become more involved at looking at the management issues at the company and its challenges.

Yang — still a key figure at Yahoo — has also become more active, said sources, and tensions between him and Bartz have increased over the last few months.

The increasing pressure on the directors of the company from its major shareholders to act has gained in recent months, said sources.

Thus, Bartz is gone and the next chapter in Yahoo’s corporate drama begins.

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work

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